Often the processes for purchasing commodities and services within a business enterprise are centralized into a procurement organization. These purchases are frequently sourced from one or more suppliers, or vendors, based on contract terms and conditions (such as price, payment terms and others), availability, and quality or legacy habit of purchasing service with known vendors. The inventors in the present disclosure have found that many organizations lack appropriate processes and disciplines to drive demand to preferred suppliers. Thus these enterprises are unable to leverage the value of the pre-negotiated contracts due to lack of process education, approval process steps or appropriate purchasing tools that could result in amounts of spending that would be considered not compliant (not being sourced through preferred suppliers). Depending upon the size of the organization, such transactions may involve significant amount of cost. Manually sifting or employing typical query tools to review large amounts of spend transaction data with multiple attributes to identify the level of non compliant spend and identify areas to take action is a daunting task.
For example, the fundamental monetary units of analysis in an enterprises can be characterized into two major parts; spend and revenue. Companies generate revenue by selling goods or services. The cost to the company to generate revenue can be broadly classified as spend. This can come in the form of buying raw-materials as input to the goods or services being sold for manufacturing oriented companies to the technology services, software, hardware and salaries to personnel for non-manufacturing entities.
The types of spending generally can be classified into direct spending (e.g., cost of goods sold, for instance, that impacts the product being manufactured such as raw materials, computer memory chip) and indirect spending (e.g., sales, general and administrative expenses such as office supplies, maintenance services, travel, marketing, communication and others). This spending is often sourced from multiple suppliers/vendors and many organizations may negotiate contracts with suppliers that determine service levels, quality, price, and other terms. Some contracts provide back-end rebates where the purchasing organization qualifies for a percentage of spend as a rebate when it achieves a predetermined spend target, or special pricing for volume spend. Procurement spend can run into large amount, but only very few companies have implemented proper processes to audit and monitor critical procurement purchases. Some organizations might have a level of visibility and control over a few procurement products that are core to their business, but beyond this the majority of procurement activities are ad-hoc in nature with minimal supervision. This can lead to severe spend leakage that often goes unnoticed due to lack of visibility or appropriate processes and controls.
The types of procurement data that are typically available are purchase orders (PO), invoices, preferred suppliers lists, supplier contracts, and general ledger entries. There are tools available in the market that process PO and invoice transactions and provide spend visibility along a few standard dimensions such as product, vendor, organization. Such tools often have a built-in rules engine to assess the quality of the data, cleanse and classify the data to standardize the vendor and product categories and also identify the PO data as compliant spend (established process) or non-compliant spend (ad-hoc spend). However, these are mainly reporting tools that provide drill-down visibility into spending across few dimensions, but they do not have capabilities to deep dive into data and determine the most problematic spend areas across a large number of dimensions. For example, today's spend analysis tools can help procurement managers to identify top non-compliant spend by vendor and product, but they do not further differentiate spend within one dimension by other attributes or provide further analysis into different areas of non-compliant spending across several dimensions. Thus, it often remains unclear where an organization should focus its attention to maximize the return on investment (ROI) when faced with non-compliance.